Edgar Allen Poe–

We estimated the entire contents of the chest, that night, as a million and a half of dollars, and upon the subsequent disposal of the trinkets and jewels (a few being retained for our own use), it was found that we had greatly under-valued the treasure.

When, at length, we had concluded our examination, and the intense excitement of the time had, in some measure, subsided, Legrand, who saw that I was dying with impatience for a solution of this most extraordinary riddle, entered into a full detail of all the circumstances connected with it.

Herr Doktor Professor–

So what determines the price of gold at any given point in time? Hotelling models say that people are willing to hold onto an exhaustible resources because they are rewarded with a rising price. Abstracting from storage costs, this says that the real price must rise at a rate equal to the real rate of interest.

…

The logic, if you think about it, is pretty intuitive: with lower interest rates, it makes more sense to hoard gold now and push its actual use further into the future, which means higher prices in the short run and the near future.

…

(T)his is essentially a “real” story about gold, in which the price has risen because expected returns on other investments have fallen; it is not, repeat not, a story about inflation expectations. Not only are surging gold prices not a sign of severe inflation just around the corner, they’re actually the result of a persistently depressed economy stuck in a liquidity trap – an economy that basically faces the threat of Japanese-style deflation, not Weimar-style inflation. So people who bought gold because they believed that inflation was around the corner were right for the wrong reasons.

And if you view the gold story as being basically about real interest rates, something else follows – namely, that having a gold standard right now would be deeply deflationary. The real price of gold “wants” to rise; if you try to peg the nominal price level to gold, that can only happen through severe deflation.

Well, Obama thought it was important enough to delay his Joint Session of Congress ‘Jobs’ speech for so I expect earth shattering developments of enormous consequence.

Or not.

I’ll not be live blogging it, or probably even watching as I’ll get a chance at the repeats, but if you have any observations of significance (or trivial expressions of snark) feel free to express them below.

Update: In a late breaking development Texas Governor Rick Perry is abandoning his state to be consumed by wild fires (after cutting the budget for fire fighting 70%) to attend this American Idol audition.

Evening Edition is an Open Thread

Now with 48 stories.

1 NASA twin spacecraft to map the inner Moon

By Kerry Sheridan, AFP

1 hr 36 mins ago

So unpredictable, and by that I mean totally…

Dictable I guess.

A Campaign Challenge: Defining Obama

By JEFF ZELENY, The New York Times

Published: September 6, 2011

Mr. Obama stands at a precarious moment of his term. Public pessimism is at its highest point in nearly three years, and his approval rating has fallen to its lowest, according to the latest Washington Post-ABC News Poll, which also found that more than 60 percent of those surveyed disapprove of how he is handling the economy and jobs.

The White House can no longer take comfort in comparing the approval ratings for Mr. Obama with Ronald Reagan’s or Bill Clinton’s in the months after their stinging midterm election defeats. By the time their re-election efforts were intensifying after Labor Day, their respective repositioning had helped elevate their approval above 50 percent.

…

“If this is just a referendum on economic conditions, then any incumbent is going to struggle with that, but it’s not just that. It’s a contest about what to do about it,” said David Axelrod, the chief strategist to the president’s re-election campaign. “I’d be more worried if I saw some compelling new argument for how to lead the country, but these guys are carrying the same old water.”

Speaking of carrying the same old water-

The president intends to offer at least some progressive proposals to help regain a fighting posture that he has not had since the health care debate, but a provision is also being discussed to place a new moratorium on some regulations that affect the economy, excluding health care and financial rules. The proposals are likely to infuriate an already unhappy Democratic base.

So he is going to be Endorsing The Rick Perry Jobs Program.

What else?  The same old, same old tax cuts that are 1) not new and will therefore not improve the economy OR create jobs and 2) are tax cuts which have been consistently proven over the last thirty years do not improve the economy OR create jobs.

Obama Jobs Plan: $300 Billion, Half to Tax Cuts

By: David Dayen, Firedog Lake

Wednesday September 7, 2011 6:10 am

We can divvy it up into five separate components:

1. tax-side stimulus. There you have the extension of the payroll tax cut, with a new employer-side cut, perhaps targeted only to firms that hire more workers on aggregate, as has been discussed.
2. infrastructure. Included in this is some amalgam of the surface transportation bill and the national infrastructure bank, along with Jared Bernstein’s FAST proposal for fixing and upgrading American public schools.
3. direct state aid. This is slightly new for this round, but still desperately needed. Jobs statistics for the past two years routinely show cuts in the public sector offsetting whatever gains exist in the private sector. Teachers and firefighters and cops and nurses are being laid off across the country. Stopping this corrosion is one of the best things the federal government can do right now.
4. help for the unemployed. Re-upping extended unemployment insurance benefits would be part of this, but also you can expect a program for long-term unemployed modeled after Georgia WORKS, which allows long-term jobless to collect benefits (as well as a small stipend) and essentially intern at local companies for a short-term assignment. This is controversial, as the benefits of Georgia WORKS are mixed at best, and labor leaders have questioned whether it violates federal laws to allow free labor for corporations. If you pushed this envelope further and made it a wage-subsidy policy, you might have something, but this appears tailored to catch the eye of Republicans.
5. mortgage relief. It’s possible some kind of mass-refinancing scheme gets announced, although there are hurdles, mainly FHFA Acting Director Ed DeMarco, who is reluctant to refi many borrowers who wouldn’t normally qualify as well as negate any representations and warrants liability on the part of the banks. There’s also the fact that banks don’t appear to be able to keep up with the refinancing applications at present, and there should be no faith that they would be able to support a surge in such work.

Let’s briefly look at the numbers. A $300 billion scheme would amount to around 2% of total GDP, and that’s being charitable by saying that this would all be used up in one year. That would have an impact, but half of this would be supply-side solutions that haven’t inspired much confidence during the recession. The question of whether temporary tax cuts are spent is a good one to ask. Especially on the employer side; if minimum wage increases have no effect on jobs, then surely tax subsidies to make hiring cheaper wouldn’t either.

What’s more, $112 billion of this $300 billion would come just from that extension of the payroll tax cut, which is already in place. That’s not stimulative, it’s just an extension of current law. So would be the $55 billion or so for unemployment benefits. Letting them expire might be undesirable, but just keeping them in place would just maintain the status quo, which last month created something on the order of zero jobs. The rest of the items amount to $130-$140 billion, not nearly enough to fill the demand gap hole. Actual direct public works spending is scant, and the supply-side faerie dust irrelevant to the actual problem.

…

If this is a policy document, it’s both inadequate and dangerous. If it’s a political one, it stays within well-drawn lines, rather than screaming what even the bond markets say the world needs – a complete reordering of fiscal policy to deal with a raging crisis. Yet we still have a Democratic Administration playing mostly on Republican turf.

(h/t lambert @ Corrente)

Obama and Jobs: Why I Don’t Believe Him Anymore

Matt Taibbi, Roling Stone Magazine

POSTED: September 6, 9:17 AM ET

I remember following Obama on the campaign trail and hearing all sorts of promises before union-heavy crowds. He said he would raise the minimum wage every year; he said he would fight free-trade agreements. He also talked about repealing the Bush tax cuts and ending tax breaks for companies that move jobs overseas.

It’s not just that he hasn’t done those things. The more important thing is that the people he’s surrounded himself with are not labor people, but stooges from Wall Street. Barack Obama has as his chief of staff a former top-ranking executive from one of the most grossly corrupt mega-companies on earth, JP Morgan Chase. He sees Bill Daley in his own office every day, yet when it comes time to talk abut labor issues, he has to go out and make selected visits twice a year or whatever to the Richard Trumkas of the world.

Listening to Obama talk about jobs and shared prosperity yesterday reminded me that we are back in campaign mode and Barack Obama has started doing again what he does best – play the part of a progressive. He’s good at it. It sounds like he has a natural affinity for union workers and ordinary people when he makes these speeches. But his policies are crafted by representatives of corporate/financial America, who happen to entirely make up his inner circle.

I just don’t believe this guy anymore, and it’s become almost painful to listen to him.

Evening Edition is an Open Thread

1 NASA mulls ‘what-ifs’ of unmanned space station

By Kerry Sheridan, AFP

2 hrs 6 mins ago

In a cloud over ozone

By Eugene Robinson, The Washington Post

Published: September 2

Republicans are trying to sell the false premise that protecting the environment inevitably means sacrificing jobs. President Obama should denounce this snake oil for what it is – rather than appear to accept it.

…

On Friday, Obama appeared to cede the point. He blocked new EPA rules limiting ground-level ozone – otherwise known as smog – as part of a larger effort to reduce “regulatory burdens and regulatory uncertainty” for U.S. businesses. The move came hours after a disappointing labor report showing that the economy added no new jobs in August.

…

As for the predictions of massive job losses, they sound just like the warnings we heard when environmental regulations ended acid rain or ensured that the citizens of Cleveland no longer had to worry about the Cuyahoga River catching fire.

There is plenty of evidence that the net effect of smart environmental regulation is to create jobs, not destroy them. New, more efficient plants are built; older, dirtier facilities are retrofitted. Companies innovate by developing new technology – ultimately making U.S. industry more competitive. And everyone is a little healthier.

Broken Windows, Ozone, and Jobs

Paul Krugman, The New York Times

September 3, 2011, 10:07 am

I’ve actually been avoiding thinking about the latest Obama cave-in, on ozone regulation; these repeated retreats are getting painful to watch. For what it’s worth, I think it’s bad politics. The Obama political people seem to think that their route to victory is to avoid doing anything that the GOP might attack – but the GOP will call Obama a socialist job-killer no matter what they do. Meanwhile, they just keep reinforcing the perception of mush from the wimp, of a president who doesn’t stand for anything.

…

(T)ighter ozone regulation would actually have created jobs: it would have forced firms to spend on upgrading or replacing equipment, helping to boost demand. Yes, it would have cost money – but that’s the point! And with corporations sitting on lots of idle cash, the money spent would not, to any significant extent, come at the expense of other investment.

More broadly, if you’re going to do environmental investments – things that are worth doing even in flush times – it’s hard to think of a better time to do them than when the resources needed to make those investments would otherwise have been idle.

Evening Edition is an Open Thread

1 Europe stocks fall 5.0%

By Ben Perry, AFP

6 hrs ago

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